Data released by the National Statistical Office on Monday showed food inflation eased in August to 9.05% from 9.27% in the preceding month. Inflation in urban India (6.8%) paced ahead of inflation in rural India (6.66%) in August for the first time since the nationwide lockdown was imposed in March. Among states and union territories, West Bengal (9.44%) faced highest retail inflation while Delhi (3.58%) saw the lowest inflation.

“The potential for further support monetary support is curbed by India’s inflation worries,” Vishrut Rana, Asia-Pacific Economist for S&P Global Ratings said.

The Reserve Bank of India has cut policy rates by 115 basis points so far this year, to 4%. However, rising food inflation has pushed inflation to 6.9% in July, higher than the upper band of the central bank’s 2%-6% target range, forcing the RBI to put a pause in its rate cutting cycle.

Data separately released by the industry department earlier in the day showed India’s wholesale price inflation turned positive in August after a gap of four months when it remained in deflationary territory, signalling producers are slowly regaining their pricing power after the supply and demand shock triggered by the coronavirus pandemic.

The wholesale price index (WPI) inflation stood at 0.16% in August against a contraction of 0.58% in July as inflation for the manufactured items accelerated to 1.27% from 0.51% during the same period. During August, crude oil prices softened 17.44% from a year ago, while fuel prices eased by 9.7% from their levels a year earlier.

Ten out of the 17 categories of manufactured products listed in WPI, including food products, oils, beverages, tobacco, pharmaceuticals, cement, basic metals saw rise in prices from their level a year ago as demand gradually picked up post lifting of the lockdown.